Just a few days ago, the Treasury Department of the United States Government announced it had hired two of the Big Four firms, PricewaterhouseCoopers and Ernst & Young to help the government implement the $700 billion bailout program aimed at Wall Street and the economy.
The US government, US Treasury Department and the US Federal Reserve recently unveiled their Troubled Asset Relief Program (TARP) to help inject liquidity and stability into the US banking system. $250 billion of this will be used to buy preferred stock from several large commercial banks and a variety of regional banks.
The Treasury has indicated that it has signed blanket contracts to allow both these firms to perform actions on an as-needed basis to implement the bailout program, with both contracts going to September 30, 2011.
In a statement, Treasury said that the two firms will help the department with accounting and internal control services that will be needed "to administer the complex portfolio of troubled assets the department will purchase, including whole loans and mortgage-backed securities."
PricewaterhouseCoopers will be the main program auditor to monitor the purchase of billions of dollars of preferred bank stock as well as toxic assets from banks. PwC stands to gain $191,000 from this initial order for auditing work.
Ernst & Young will provide general accounting support, and will initially get $492,000 from the Treasury.
Inevitably, the onus of credible and unbiased participants in this entire process falls again on the Big Four firms, to continue their watchdog duties on behalf of investors. In this case, this is perhaps the highest profile auditing work that could be granted to any firm. Investors in this case are taxpayers in the United States and the client is the US government. The whole process will be under extraordinary scrutiny and every step of the audit would need to be rigorously checked for quality. More so, since this is a unique initiative, the auditing circumstances are quite complex. PwC and E&Y have been awarded this prime engagement, but this is not without risk.
We question what happened to KPMG and Deloitte in this process, were they not awarded for some reason, or did they not even choose to participate.
Sunday, October 26, 2008
Tuesday, October 14, 2008
KPMG Asia Pacific Chairman Becomes New Deputy Chairman of International Firm
KPMG just appointed John B. Harrison to a newly created and critical position in firm management. Harrison 52, will become deputy chairman of KPMG International. He was most recently chairman of KPMG’s Asia Pacific region and co-chairman of the KPMG China and Hong Kong SAR firm with Carlson Tong, 53. Harrison will continue to hold both positions through March 2009, when his terms expire. Harrison joined KPMG London in 1977 with a B.Sc. in Mathematics from Durham University.
Though not clearly stated in KPMG’s announcement, Harrison will presumably report to
Timothy P. Flynn, chairman, KPMG International. Michael P. Wareing remains chief executive officer of KPMG International.
We can only conjecture that the Asia-Pacific’s growing importance within the KPMG firm and prospect of their continued strong growth would propel the regional chairman to take a leading role within the KPMG global organization.
Though not clearly stated in KPMG’s announcement, Harrison will presumably report to
Timothy P. Flynn, chairman, KPMG International. Michael P. Wareing remains chief executive officer of KPMG International.
We can only conjecture that the Asia-Pacific’s growing importance within the KPMG firm and prospect of their continued strong growth would propel the regional chairman to take a leading role within the KPMG global organization.
Thursday, October 09, 2008
BearingPoint (NYSE: BE) stock price drops to 20 cents!
We blogged earlier that BearingPoint stock had touched its all time low of 50 cents a share in September. But that was before the current meltdown in the financial markets, with today’s (October 9, 2008) shocking drop in the Dow of ~ 700 points, BearingPoint’s stock has fallen further amazingly to an even lower all-time low of 20 cents, touching at one point an intra-day low of 17 cents.The entire company’s market capitalization is now only about $40 million, this for a consulting firm in annual sales in excess of $3 billion.
BearingPoint’s stock price is now less than a pack of Wrigley’s gum.
If there is any value to be created, this may be a time to go private, if of course there is a willing investor and a receptive debt market to absorb the risk and make the dollars available for this transaction.
The bar is so low, but we ask, are there any takers?
BearingPoint’s stock price is now less than a pack of Wrigley’s gum.
If there is any value to be created, this may be a time to go private, if of course there is a willing investor and a receptive debt market to absorb the risk and make the dollars available for this transaction.
The bar is so low, but we ask, are there any takers?
Tuesday, October 07, 2008
Ernst and Young Revenues Rise 16%, Retains Third Place in Big Four
Another Big4 firm reports good performance.
Today, Ernst & Young reported that its worldwide revenues increased to US$24.5 billion for the fiscal year ending 30 June 2008, rising 16.2% in dollar terms and 9.5% in local currency terms from the previous year’s revenue of $21.1 billion. Major factors included
gaining new clients, new services sales and ROI in emerging markets, offset somewhat by “audit efficiencies enabled by the new US internal control standard” (which we would assume are clients automating their processes and relying less on E&Y) and economic slowness in many markets.
In terms of geography, Asia-Pacific grew 34.3% to US$3.3 billion (Japan up 43%, Far East Area up 32% and Oceania Area up 29.0%). EMEIA was up 18.4% to US$11.4 billion and Americas growing 8.9% to US$9.8 billion. In line with other Big four firms, Ernst and Young recorded highest growth in Asian markets and still turned in creditable performance in the USA.
Across service lines, Assurance & Advisory Business Services grew 14.2%, Tax grew 21.2% and Transaction Advisory Service revenues increased 19.6%.
Recently we blogged about PricewaterhouseCoopers increasing revenues by 14% and Deloitte and Touche growing its top line by 17%, so Ernst and Young’s performance is in line with its peers. With this, its probably safe to say that Ernst and Young will retain its third position among Big Four firms, KPMG is yet to report and unless it shows a remarkable increase, it is likely to say in fourth place.
June 30, 2008 does mark almost a year of financial crisis and slowing global economies, and to turn in double digit growth from very large revenue bases shows the clout of the Big Four firms, their global nature, ability to perform despite tough external economic conditions, and crucial role in the global business environment.
Once KPMG results come in a few weeks, we’ll publish our 2008 Annual Big Four Firms Financial Performance Scorecard.
Today, Ernst & Young reported that its worldwide revenues increased to US$24.5 billion for the fiscal year ending 30 June 2008, rising 16.2% in dollar terms and 9.5% in local currency terms from the previous year’s revenue of $21.1 billion. Major factors included
gaining new clients, new services sales and ROI in emerging markets, offset somewhat by “audit efficiencies enabled by the new US internal control standard” (which we would assume are clients automating their processes and relying less on E&Y) and economic slowness in many markets.
In terms of geography, Asia-Pacific grew 34.3% to US$3.3 billion (Japan up 43%, Far East Area up 32% and Oceania Area up 29.0%). EMEIA was up 18.4% to US$11.4 billion and Americas growing 8.9% to US$9.8 billion. In line with other Big four firms, Ernst and Young recorded highest growth in Asian markets and still turned in creditable performance in the USA.
Across service lines, Assurance & Advisory Business Services grew 14.2%, Tax grew 21.2% and Transaction Advisory Service revenues increased 19.6%.
Recently we blogged about PricewaterhouseCoopers increasing revenues by 14% and Deloitte and Touche growing its top line by 17%, so Ernst and Young’s performance is in line with its peers. With this, its probably safe to say that Ernst and Young will retain its third position among Big Four firms, KPMG is yet to report and unless it shows a remarkable increase, it is likely to say in fourth place.
June 30, 2008 does mark almost a year of financial crisis and slowing global economies, and to turn in double digit growth from very large revenue bases shows the clout of the Big Four firms, their global nature, ability to perform despite tough external economic conditions, and crucial role in the global business environment.
Once KPMG results come in a few weeks, we’ll publish our 2008 Annual Big Four Firms Financial Performance Scorecard.
Friday, October 03, 2008
KPMG Holland Give “Green Light” to Join KPMG Europe
KPMG Holland reported today that its 208 partners had agreed to join KPMG Europe which was established in 2007 and contains the list of British, German, Swiss and Spanish firms. In 2007, KPMG Holland had voted against the merger. But now, the Dutch firm chairman Herman Dijkhuizen cited internationalization, specialization and seamless service as key drivers for this change of heart.
Even with the German and British firms combined, we recall that KPMG had stated that the merged firm would be the largest in Europe and adding the Dutch firm now will only make this behemoth larger. We have not seen similar aggregation among the European units of the other Big Four firms, but soon they may have to react in order to stay global, multi-country, pan-European and competitive.
Our Dutch readers can see the original press release here:
http://www.kpmg.nl/site.asp?id=2036&process_mode=mode_doc&doc_id=46267
Others can get it translated in Google
http://translate.google.com/translate?u=www.kpmg.nl%2Fsite.asp%3Fid%3D2036%26process_mode%3Dmode_doc%26doc_id%3D46267&hl=en&ie=UTF-8&sl=nl&tl=en
Even with the German and British firms combined, we recall that KPMG had stated that the merged firm would be the largest in Europe and adding the Dutch firm now will only make this behemoth larger. We have not seen similar aggregation among the European units of the other Big Four firms, but soon they may have to react in order to stay global, multi-country, pan-European and competitive.
Our Dutch readers can see the original press release here:
http://www.kpmg.nl/site.asp?id=2036&process_mode=mode_doc&doc_id=46267
Others can get it translated in Google
http://translate.google.com/translate?u=www.kpmg.nl%2Fsite.asp%3Fid%3D2036%26process_mode%3Dmode_doc%26doc_id%3D46267&hl=en&ie=UTF-8&sl=nl&tl=en
Wednesday, October 01, 2008
PricewaterhouseCoopers 2008 Revenue Up 14%, Maintains Top Position
PricewaterhouseCoopers just released its 2008 revenue figures for the year ending June 30, 2008. Global revenues were US$28.2 billion, increasing at 8% at constant foreign exchange rates and 14% at variable exchange rates, since the US dollar plummeted against foreign currencies during this period. In USD reporting terms, 2008 revenues of $28.2 billion did grow 14% from 2007 revenues of $24.7 billion. With this, PwC remains the top dog among Big Four firms.
Assurance practice reported revenues at US$13.8 billion were up only 3% due to difficult market conditions and settling down after many years of high growth. PwC also pointed to “changing regulatory requirements and the very competitive nature of the assurance market” as a reason for this relative sluggishness.
Tax operations increased 13% to US$7.5 billion due to strong growth on all service offerings. Advisory business were up 14% to US$6.9 billion due to good performances in all major markets, a fast maturing consulting business, and good M&A advisory despite the drooping M&A transactions area.
Combined tax and advisory were 51% of PwC’s global revenues compared with 48% in FY2007 and 44% in FY 2003. With non-assurance businesses now in the majority, we ask a rhetorical question whether the Big Four firms are truly in the public audit business or really global consultancies offering tax, M&A, management advisory with an attached assurance division.
Geographically, Asia revenue was up 21%, Middle East and Africa up 20%, Central and Eastern Europe up 20%, Western Europe was decent at 8% but North America was up only by 2%. Which brings up another rhetorical question – are the Big Four firms are really US-centric, given that North American revenues are only 30% of total revenues and it is the slowest growing region among all.
As we blogged earlier, PwC is implementing a new “global cluster” structure, and said, “The new structure is effective immediately. PwC member firms will continue to be locally owned and managed partnerships, preserving the organisation's entrepreneurial culture and retaining a high level of accountability to stakeholders and regulators.”
Finally, we saw Deloitte grow its 2008 revenue by 17% to $27.0 billion from 2007 revenue of $23.1 billion. Deloitte is only $1.2 billion behind PwC in 2008 whereas it was $1.6 billion behind PwC in 2007, rapidly closing this gap. Consider hypothetically that if Deloitte grew 15% from its 2008 revenue of $27.0 to 2009 revenue of $31.1 billion, and PwC grew 10% from its 2008 revenue of $28.2 to 2009 revenue of $31.0 billion, Deloitte could conceivably become the largest Big Four firm on the planet.
Assurance practice reported revenues at US$13.8 billion were up only 3% due to difficult market conditions and settling down after many years of high growth. PwC also pointed to “changing regulatory requirements and the very competitive nature of the assurance market” as a reason for this relative sluggishness.
Tax operations increased 13% to US$7.5 billion due to strong growth on all service offerings. Advisory business were up 14% to US$6.9 billion due to good performances in all major markets, a fast maturing consulting business, and good M&A advisory despite the drooping M&A transactions area.
Combined tax and advisory were 51% of PwC’s global revenues compared with 48% in FY2007 and 44% in FY 2003. With non-assurance businesses now in the majority, we ask a rhetorical question whether the Big Four firms are truly in the public audit business or really global consultancies offering tax, M&A, management advisory with an attached assurance division.
Geographically, Asia revenue was up 21%, Middle East and Africa up 20%, Central and Eastern Europe up 20%, Western Europe was decent at 8% but North America was up only by 2%. Which brings up another rhetorical question – are the Big Four firms are really US-centric, given that North American revenues are only 30% of total revenues and it is the slowest growing region among all.
As we blogged earlier, PwC is implementing a new “global cluster” structure, and said, “The new structure is effective immediately. PwC member firms will continue to be locally owned and managed partnerships, preserving the organisation's entrepreneurial culture and retaining a high level of accountability to stakeholders and regulators.”
Finally, we saw Deloitte grow its 2008 revenue by 17% to $27.0 billion from 2007 revenue of $23.1 billion. Deloitte is only $1.2 billion behind PwC in 2008 whereas it was $1.6 billion behind PwC in 2007, rapidly closing this gap. Consider hypothetically that if Deloitte grew 15% from its 2008 revenue of $27.0 to 2009 revenue of $31.1 billion, and PwC grew 10% from its 2008 revenue of $28.2 to 2009 revenue of $31.0 billion, Deloitte could conceivably become the largest Big Four firm on the planet.
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